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How To Read A Check Stub

Whether you have just received your first pay stub (if that’s the case, congratulations!) and want to know what everything means, or there’s a section on your new paystub creator that has you scratching your head in confusion, we want to help.

When you examine your check stub, it’s essential to understand everything you see in front of you. You’ll need to use this information for taxes and budgeting. Read on to learn all about how to read check stub details.

How Does a Check Stub Work?

When you receive a paycheck stub, you’ll see a summary of your earnings. There will be columns for earnings, hours worked, and the rate paid. You’ll also notice areas for deductions and withholding, as well as a section for your personal and check information.

You will also likely see these figures printed for your current pay period and the “year to date,” often shortened to YTD. This column keeps a running total of taxes and withholdings from the start of the fiscal year through your current check. So, if your withholdings and taxes seem way too high when reading your check stub, make sure you’re looking at the “current pay period” column and not the “year to date” one.

In addition to the financial figures, your personal and check information will show your tax filing status (for example, single or married), as well as the withholding number. Additional codes may also show up for other notable earnings, fees, or withholdings.

Earnings Section

The earnings section of your check stub shows how much you made during the current pay period. If you worked any overtime hours, you would also see those listed and your overtime rate.

You may also see one-time bonuses, tips, relocation assistance, retention bonuses, hazard pay, per diem, travel allowances, and geographic and shift differentials here. It depends on your industry and how your earnings are calculated, of course; however, be sure to pay attention to these, as some categories are quite heavily taxed (such as bonuses).

Finally, you will see any leave listed here or in a “benefits” area. This includes sick leave, vacation time, parental leave, disability or partial disability, or Family and Medical Leave Act earnings.

Deductions Section

When you move to the deductions section of your pay stub, you’ll see pre-tax deductions for certain employee benefits you receive. Standard deductions are for health, dental, and vision insurance; flexible spending accounts and health savings accounts; and retirement plans and contributions (including employer matching). You may also see deductions for group life or disability insurance.

Depending on your employment contract, you may also have to pay union fees or into a pension. Be on the lookout for these in the deductions section as well.

You should be able to compare all of these figures in the “current pay period” and “year to date” columns to see how much goes out of your paychecks.

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Withholdings Section

The withholdings section of your check stub shows money that your employer takes out of your paycheck as required by law. This includes federal and state tax, Social Security contributions, any unemployment insurance, “Workman’s Comp.”

As a part of a legal agreement, your wages may be garnished, or child support payments may be taken out of your paycheck as well. This should be listed on the check stub. Your employer does not control this. Instead, it is decreed by a legal entity, and your employer must honor it.

The last item you may see withheld is a tax levy. This typically happens as a last resort and is an attempt by the IRS or another taxing authority to collect taxes owed.

How Do I Use This Information for Taxes?

Aside from tracking your earnings and savings contributions, the information you see printed on your check stub will help you prepare for tax season.

Your pay stub will list your gross earnings and your net earnings. “Gross earnings” refers to everything you have earned based on your hourly wage before tax deductions. “Net earnings” is what you take home after all taxes have been withheld and deductions have been applied.

You must base your budget on your “net earnings,” as it is difficult to budget for money that never enters your bank account!

However, you must plan for taxes based on your gross earnings. You will, of course, report all earnings and deductions, but you need to know how much you earned before any deductions or withholdings are taken from your paycheck.

How to Read a Check Stub

Now that you know the information it contains, it’s time to learn how to read a pay stub. It’s important to remember your right to receive a check stub varies from state to state and company to company.

Some states do not require employers to provide employees with pay stubs. In fact, federal law only requires employers to keep accurate records of hours worked and wages paid to employees. It does not guarantee employees will have access to check stubs. This means that pay stub law falls to the state level of legislation.

That being said, some states will require employers to provide employees with pay stubs, whether paper or electronic, while others will simply leave it up to the company as to whether they choose to furnish their employees with this information every pay period.

If a state does require companies to provide check stubs, then every stub must contain whatever information the state defines as necessary. Most will need the following:

  • Employee information
  • Earnings
  • Wages
  • Hours worked in a pay period
  • Gross and net wages
  • Credits, bonuses, or other additional pay
  • Deductions
  • Withholdings

Many will also list PTO accrual on pay stubs, though this is not always required by law.

The Takeaway

Now that you know how to read a check stub, we hope you’ll be empowered to make the best financial decisions for your needs. Understanding the information printed on a check stub is vital for budgeting and paying taxes.

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